Overall, 2014 was a good year for stocks, but commodities companies were mostly left out of the rally, particularly gold and oil companies, which suffered as the prices for both commodities tumbled. As we head in 2015, many are calling for a market correction, but there are a few companies out there that analysts think will have bull runs in 2015, and a lot of these are commodities companies.
The very fact that 2014 was a dismal year for many commodities companies, putting their stocks at a discount, supports at least a recovery rally for the companies, even if the rest of the market stages a correction. Here are three companies — Agnico Eagle Mines Ltd. (TSX: AEM)(NYSE: AEM), Canadian Natural Resources Limited (TSX: CNQ)(NYSE: CNQ), and Suncor Energy Inc. (TSX: SU)(NYSE: SU) — that according to the one-year price target estimate compiled by Capital IQ will appreciate more than 30% over the next 52 weeks.
Agnico Eagle Mines Ltd.
Closing price December 18, 2014: $28.68 (US$24.74), 1-year average analyst target: US$35.26
Agnico Eagle Mines is a gold miner, and for that reason alone the company’s stock fell pressure this year, falling just over 6%. If you go back a few years, to 2011 when gold peaked, Agnico Eagle’s stock was much higher, in fact it’s down 65% since 2011. If the company’s stock has fallen so steeply for the past few years, why are analysts suddenly bullish on the stock?
Many think that the gold sell-off is overdone, but even if it is not, and we see further weakness in gold there is a case for Agnico Eagle Mines’ stock to appreciate. Agnico Eagle Mines is a low-cost gold producer with healthy financials that have enabled the company to grow through acquisitions, even in the current climate. In fact, if low gold prices persist Agnico Eagle Mines could use its strong financials to purchase low-cost gold mines from their struggling owners, further reducing its cost structure and creating a higher value company. These moves would most definitely return value to shareholders in 2015.
Canadian Natural Resources Limited
Closing price December 18, 2014: $35.00 (US$30.19), 1-year average analyst target: US$45.89
Canadian Natural Resources Limited is a low-cost oil producer that has been hit by the slide in oil prices, but even now as oil prices remain weak, analysts are looking for the stock to gain about 34% over the next year.
Just like Agnico Eagle Mines is a low-cost gold producer, Canadian Natural Resources is a low-cost oil producer. Even when times are challenging for a commodity, being a low-cost producer has its advantages. Some may argue that it is in the tough times when low-cost producers really shine because they can survive, purchase assets from struggling companies, and keep production running so that they can benefit from upticks in prices that happen early in the recovery cycle for a commodity, often when other producers remain idle. For this reason, even if oil prices remain weak, it is not far-fetched for the company’s stock to potentially appreciate so significantly in 2015.
Suncor Energy Ltd.
Closing price December 18, 2014: $36.13 (US$31.14), 1-year average analyst target: US$46.40.
No surprise here, Suncor Energy is a low-cost oil producer. In fact, in the most recent quarter the company produced oil for cash costs of just above $31 a barrel. With all the talk about how some oil companies are losing money at $60 a barrel, Suncor’s production cost is still about half of that. Beyond that, the company also has a sound financial position, in fact it has one of the lowest debt-to-equity ratios in the industry.
Suncor Energy can remain profitable beyond the point that anyone could see only falling; the most pessimistic but still analytically sound forecasts I’ve seen right now call for $45 per barrel oil. The company’s ability to turn a profit even under low oil prices, and the fact that the stock has been caught up in the sell-off of oil stocks make it a possibility that this company will meet analysts’ price targets a year from now.
